Dealing with debt

Debt is the money one person owes to another.

A debtor is the person who legally owesthe money, or has agreed to pay money.

A creditor is the person or company who the money is owed to.

By signing up to a contract, you agree to pay the company money every month. In exchange, the company agrees to provide you with the product, good or service. This makes you the debtor, and the company the creditor. If you do not pay your bill, then you are in debt to the company.

You will also become the debtor if you sign up for a product, good or service for someone else, such as friend or someone in your family. Because you signed the contract, the company will see you as the person who owes the money, even if you’re the one not using the product, good or service.

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What is a debt collector?

A debt collector is a person who collects debts for a creditor such a phone company. Mostly, debt collectors work directly for the company, but sometimes debt collectors work for another company called a debt collection agency. Debt collectors will put pressure on you to pay your bills. However, there are legal limits on this pressure.

Debt Collection Agencies are specialised companies who chase up unpaid bills and debts. Companies sometimes use them rather than chasing you up themselves.

An assignment of debt is where the person who you owe money to changes. Companies will often assign your debt to the debt collector. This does not mean that you no longer owe someone money, but rather that you need to pay the debt collector and not the company. If a company does assign your debt, they need to let you know in writing.

What are debt collectors allowed to do?

A debt collector should only contact you when it is necessary to do so and when the contact is made for a reasonable purpose.

A debt collector can only call you a maximum of 3 times per week, between 7:30am – 9pm weekdays, and 9am-9pm weekends.

A debt collector can only send you a maximum of 3 letters per week.

A debt collector can visit you in person, but only be between the hours of 9am – 9pm. They are only allowed to visit you at home or work if you agree, or if they have no other way of contacting you.

What are debt collectors NOT allowed to do?

Take unfair advantage of any vulnerability, including if you are under 18 years old. They can’t threaten, intimidate, or frighten you. If they do, it’s known as unconscionable conduct, and it’s against the law.

Call on a public holiday

Harass you (e.g. call you every day requesting payment)

Threaten, intimidate, or frighten your friends or family.

Make any unnecessary or unreasonable contact by email, SMS or telephone

Block your way

Shout at you, use racist or personal comments or swear at you

Talk about your situation to other people like neighbours or family unless you have agreed

Say anything that is untrue like;

you owe more than you do

there has been a court judgment if there hasn’t been

Unpaid debts are a criminal offence and they will involve the police

Your car or other belongings will be taken from you and sold

Your pay from work will be taken

Charge you an unreasonable amount of interest or late fees.

The debt collector cannot charge you their own fee on top of your company’s fees and charges, except for legal costs.

If any of the above has happened to you, then you should call the TIO for assistance.

What will a debt collector normally do & how should I respond?

1. A debt collector will contact you and ask you for payment

A debt collector might contact you by:

Calling your phone

Sending you a letter called a letter of demand.

Letters of demand is a letter from your company reminding you that you owe them money, telling you that you are late to pay your bill, or a letter telling you that you have to pay your debt.

If you don’t understand a letter of demand you can get help (see below).

Visiting your home or work if there is no other way to contact you

2. If you still don’t pay the bill, a debt collector can take you to court

If you are taken to court, you will be sent a statement of claim.

Statement of Claim is the official court document which says how much the debt collector believes you owed the company. It might also lay out other amounts of money (like interest or legal costs) that your company wants you to pay. It will give you a total figure of how much the debt collector will be asking the court to order you to pay.

If you receive a statement of claim, it has nothing to do with the police, and does NOT mean that you might go to jail.

It is vital that you respond to a statement of claim within 28 days, especially if you do not agree that you owe money to the company. If you get a statement of claim, you should seek legal advice about it.

If you don’t respond within 28 days, the company could get a judgment order.

Judgement Order is a court deciding your case without you being there, and likely the Court will order that you owe the money that the debt collector/ company is claiming as well as court costs.

3. What happens if the debt collector gets a judgment order, but I still don’t pay?

This is a serious situation! The debt collector can ask the court to take your property and sell it to pay off your debt, or have money taken out of your wages. Additionally. if you get in trouble with your company for failing to pay your bills or debt, then you will likely be given a bad credit history.

Credit Historyis a record which tells companies how likely you are to pay back a loan on the basis of your previous behaviours. Failing to pay previous debts or loans on time will often indicate that you will be less likely to pay in the future. If you have a bad credit history you may find it difficult to buy things using credit in the future. This means that if you want to get a loan or a credit card to buy something else (like a car or a house) later on, a credit card company or a bank might think twice or even refuse to lend you money based on your credit history.

4. What should I do if I am contacted by a debt collector?

You could talk to someone about it, and get some financial advice. Financial counsellors help people who have difficulty paying their bills. There are financial counsellors in every state and territory who provide a free, independent, and confidential service. Click here for contact details (go to bottom of page).

If you think that the debt collector is wrong, and you do not owe the amount that the debt collector says that you owe, then you have a right to dispute the amount of the debt. Ask the debt collector for all the account information to prove that you owe the debt. You must be provided with this information.

You should contact your company to see what options are open to you.

If you can’t afford to pay the debt, you should be able to talk with the company and arrange with them to pay your debt off slowly over a few months. Your company may be flexible and decide to:

Give you more time to pay, or

Ask you to pay off the debt in small amounts over a longer period of time

Ask you to pay only part of your debt

Whatever you choose to do, do not get pushed into making promises that you won’t be able to keep, such as agreeing to paying off the debt in a way that you cannot afford.

5. What should I do if I reach an agreement with the debt collector or the creditor over the phone or in person?

If you reach an agreement with the debt collector over the phone or in person, you should always ask for that agreement to be confirmed in writing. You could confirm it in writing yourself, by writing a letter to the debt collector or creditor. It is important to keep a written copy of the agreement, as well as a record of any phone calls. In keeping these records you should always get write down the date and time of the conversation, the name and job title of any people you speak to, as well as a note about what you spoke about.

Who can help me?

Anauthorised representative is an adult who will represent you and advocate on your behalf about the debt. You can appoint an authorised representative by calling the company and giving a specific the right to talk to the company on your behalf. It is always important to check that the person who you want to authorise is okay with it, and knows that you have authorised them. Common authorised representatives include ﬁnancial counsellors, ﬁnancial advisors, community workers, and lawyers; as well as parents, guardians or carers. Remember, you don’t have to face the debt collector alone!

Helpful contacts

A Financial Counsellor (or Debt Counsellor) is qualified person who can help you to develop a plan to pay off a debt and help explain your rights to you. There are free and independent financial counselling services in each State and Territory. In order to help you develop a plan to pay off your debt, they will often ask you to think about your income, expenses, what you own and other debts that you owe.

ACommunity Legal Centre is an organisation that can provide you will legal advice or information about your debt and other legal matters generally. The lawyers who work at these centres can give you specific advice on what to say to your company or the debt collector. They can also help you if you need to contest the debt, or if you think the debt collector is putting too much pressure on you.

Helpful contacts

Free financial counselling hotline:1800 007 007 (Open 9.30am-4pm Monday-Friday. Calling this number will automatically put you through to the phone service in your state or territory)

Click here to find a free financial counsellor in your state or territory.